The squeeze on household budgets is forcing families to shelve buying a new home, experts warned on Tuesday, as official figures showed a sharp fall in stamp duty receipts.
Data released by the Office for National Statistics showed stamp duty on land and property sales fell from £1.3 billion to £900 million in February — a 27 per cent drop compared to the same month last year.
Since December monthly figures for total stamp duty, which also includes tax receipts from share sales, have fallen from more than £2 billion to around £1.2 billion.
Helen Morrissey, head of retirement analysis at financial services firm Hargreaves Lansdown, said: “Stamp duty receipts started the tax year strongly but have quickly run out of steam as the property market slows dramatically.
“The cost-of-living crisis has hit our budgets hard and means more people are having to shelve the prospect of buying a new home for the time being.
“Added to this, changes to stamp duty will have also had a dampening effect on receipts. We’ve seen mortgage rates come down since then, but they remain higher than many people are used to, and this will likely put them off dipping a toe in the market for now.”
Average house prices in London have fallen by 0.9 per cent over the past year, according to a report by Halifax earlier this month, as the capital’s housing market feels the squeeze.
Homeowners are anxiously eyeing this week’s decision by the Bank of England’s Monetary Policy Committee to see whether it opts for another hike in interest rates, which are already at a 14-year high of 4 per cent.
But concerns over another major banking crisis following the collapse of Credit Suisse and Silicon Valley Bank, partly prompted by rising interest rates, may persuade the Bank to keep rates where they are for now.
There were further signs this morning that the rescue takeover of Credit Suisse by UBS, brokered by the Swiss government on Sunday, may have calmed jittery financial markets with the FTSE 100 up 0.8 per cent in early trading.
However, economists warned that an escalation of the banking crisis could “blow away” an improvement in the UK’s public finances.
New official figures published today showed that nearly £10 billion of spending on energy support schemes pushed UK Government borrowing to
£16.7 billion last month — the highest February figure since monthly records began in 1993.
But with one month to go until the end of the financial year, the total amount borrowed to the end of February was £132 billion, raising hopes that borrowing could come in well under the Office for Budget Responsibility’s revised forecast of £152 billion.
Ruth Gregory, deputy chief UK economist at Capital Economics, said the improved picture on the public finances could give Chancellor Jeremy Hunt some firepower in his autumn fiscal event later this year.
But she added: “The big risk is that the turmoil in the banking sector deepens the economic downturn and the recent improvement in the public finances is blown away.”
